$1,800 For Your Gold

Someone is willing to buy your gold next December for $1,800 per ounce.  Who would do such a thing and why…

I got this link from ZeroHedge.com:  http://www.fmxconnect.com/fmxmetalsconnect/post/2011/02/03/Morning-Gold-Fix-ndash3b-February-3-2011.aspx

Here’s the Dave’s response: 

This may be an oversimplification, but tell me where I’m wrong.  Let’s say you’ve been long equities for the past six months.  You’ve done great and now you want to stay long and are willing to buy some insurance against a fear-based collapse in the S & P.  You expect QE3 to manifest in more exported inflation as the Muslim Brotherhood expands its footprint.  What would you do?  You’d buy these gold calls and stay long for the ride.

There’s only one problem with the plan.  It’s paper-based, so the system has to hold for you to redeem.  Don’t confuse a gold dinar with a gold etf, or you might just be left holding dollars or SDR’s, the very thing you were trying to hedge against.  This doesn’t solve systemic risk and you if think there’s no such thing as systemic risk, then that’s exactly how a confidence game functions.  As long as you believe you’re only a wire transfer away from trouble, then you obviously don’t understand how the “reset button” will work. 

Getting physical metals is not the complete solution as much as gaining an understanding that global currencies in their current form are no longer satisfying the coincidence of wants, but rather the medium (currency) is becoming representative of the message.  It’s the very use of the debt-based currency itself that forms the weapon against you.  For example, Craig’s List is probably a more valuable currency at satisfying the coincidence of needs than a new high interest “Ink” B2B credit card from J. P. Morgan/Chase ever will be, not to mention freecycle.com or twitter.  They’re already trading cell phone minutes in Africa as currency.  Alternative solutions to the coincidence of wants is the tangible threat to the new global currency and they know it. 

Benkler’s book The Wealth of Networks misstates the wealth as being “within the net” when it’s actually in the nodes.  Alternative connections such as Google voice relayed over Twitter out of Egypt or you local penny saver swap paper (will swap firewood for chainsaw) are just two examples of the future of currency.  The question is; do we all submit to the Apple paradigm of a 70/30 split as manifest in today’s News Corp launch of The Daily.  That makes Bernanke’s 6% per annum deal look like B. J.’s Wholesale Club. 

What’s in your wallet?  Is there anything there that’s not subject to the “reset button” much less the kill switch.  I can almost hear you saying, “But what about the airport and my not-Hertz brand rental car?”  Exactly.    

Dave Harrison

tradewithdave.com

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